U.S. Securities and Exchange Commission
Litigation Release No. 19258 / June 9, 2005
Securities and Exchange Commission v. Focus Financial Associates, Inc., Civil Action No. 05-21527-CIV-Moore/Garber (S.D. FL)
SEC Sues Companies and Individuals Involved in a Ponzi Scheme that Raised Approximately $6 Million From 600 Haitian-American Investors Living in South Florida
The Securities and Exchange Commission (SEC) filed a civil injunctive action against Focus Financial Associates, Inc. and Focus Development Center, Inc. (collectively, the Focus Companies), and their principals Max Francois, Aiby Pierre-Louis, and Jean Fritz Montinard. According to the Complaint, the defendants engaged in an affinity fraud that targeted members of the Haitian-American community in Miami through local radio programs and presentations to Haitian-American church congregations. The case, filed in the United States District Court for the Southern District of Florida, has been assigned to Judge Michael Moore.
The Commission’s complaint alleges that from February 2002 to July 2004, the Focus Companies and their principals raised approximately $6 million from about 600 Haitian-American investors living in South Florida. The Defendants offered twelve-month term notes that purportedly generated “guaranteed” annual returns of 15 to 20%. The Defendants told prospective investors that the funds they invested would be distributed to companies operating under a related “Focus” name, including an airline providing direct flights between Miami and Haiti, a tax return preparation service, a chiropractic center, a landscaping service, an auto dealership, and two auto repair shops, among others. The individual Defendants touted their experience in running these businesses, and claimed that the returns to investors would be paid from the profits that were being generated by the businesses. Defendants claimed that the investment provided a unique opportunity for members of the Haitian community to earn a guaranteed return of over 15%, while at the same time creating jobs and making an investment in their own community. In truth, Defendants’ scheme was a Ponzi scheme because all principal and interest payments made to investors were made with new investor funds, and not the new businesses’ profits.
The SEC’s Complaint alleges that, as a result of their conduct, Defendants violated Section 17(a) of the Securities Act of 1933 (Securities Act), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5, thereunder. In addition to permanent injunctions, the Commission is seeking an order that the defendants disgorge all ill-gotten gains, with pre-judgment interest, and an order imposing civil money penalties.
The Commission has translated into Creole and posted on its website its press release announcing this action (www.sec.gov/news/press/2005-86_creole.pdf), and certain of its investor education brochures (www.sec.gov/investor/pubs/affinity_creole.htm). In addition, the Commission’s Southeast Regional Office is currently planning to hold an investor assistance program to answer questions about this case in particular and also to provide information that investors can use to help them avoid similar affinity scams in the future. The date and location of the meeting will be posted in the near future on the SEC’s website at www.sec.gov.